Britain's proposals for reforming the EU budget were last night dismissed by the European Commission president as "unacceptable" and "simply not realistic".
Jose Manuel Barroso warned the plans, which would scale back the 2007-13 budget, provided insufficient investment in an enlarged EU and were unfair to new member states.
However, foreign secretary Jack Straw said the plans provided a "sound basis on which all our citizens can thrive in an enlarged EU", adding: "These are good proposals for the UK and good proposals for Europe."
The proposals have been put forward in an effort to break the deadlock over future financing of the EU, ahead of a summit meeting next week. This meeting is the last chance to reach a budget deal before the end of the UK's presidency of the EU on December 31st.
Under the plans, the total budget would be cut from the ?1,025 billion proposed earlier this year (1.24 per cent of the total national income of member states) to ?847 billion (1.03 per cent).
This would cut the funding promised to the ten new member states by $14 billion to $150 billion, but Mr Straw insisted there would be "practical changes" to remove the obstacles that currently exist to spending this money.
On the controversial issue of Britain's ?5 billion rebate, secured by Margaret Thatcher in 1984, the government has proposed that Britain pay an extra ?8 billion into the EU budget over seven years.
This could either come off the rebate, by exempting the new member states from paying into it, or be paid for by increasing the contribution to the EU through VAT receipts.
Announcing the plans last night, Mr Straw said Britain recognised its responsibility to pay a "fair contribution" to the cost of enlargement of the EU, because it has long championed the idea and expected to benefit significantly from it.
"The opposition parties have called for significant increases in structural and cohesion funding in central and eastern Europe. This budget delivers that objective," he said.
"But it has to be paid for. We are prepared to pay our fair share, but no more than our fair share."
However, shadow Europe minister Graham Brady warned that the plans were "ill-considered and damaging", and went against Tony Blair's promise that there would be no "surrender" of the rebate without reform of agricultural subsidies.
The dispute over how to reform the rebate and the common agricultural policy (Cap), which currently makes up more than 40 per cent of the total EU budget, was the primary cause for the collapse of talks on financing earlier this year.
Speaking last week, Mr Blair said the two were still "inextricably linked" but admitted it was looking increasingly difficult to secure reform of both at the same time.
Last night, Mr Straw insisted Britain's overall aim was still to secure fundamental reform of subsidies, which was the reason for the rebate in the first place, and said the EU Commission's review of expenditure would address this.
The response to the plans has been mixed, with the Netherlands and the Czech Republic giving them a cautious welcome, but France and Poland speaking out strongly against them.
The strongest reaction was from the EU Commission president, who is usually on good terms with Mr Blair, but who described Britain's budget plans as fit only for a "mini Europe, not the strong Europe that we need".
"Our ambition is an open, modern and enlarged Europe. For this to happen, the union must have the means to deliver on the policies agreed between the member states, the European parliament and the commission," he said.
"This is not possible under this proposal for two main reasons: on the one hand, the level of investment it foresees is insufficient.
"On the other, it has not yet struck the right balance between the member states. In particular, the proposal needs to become fairer for new member states."
Britain now has a week to persuade the 24 other member states to accept its proposals ahead of the EU summit, and to this end, Mr Blair will meet the leaders of Portugal, Finland, Slovenia, Sweden and the Netherlands on Thursday.
On Friday, he will speak with the Luxembourg premier and prime ministers of Ireland, Greece and Spain, in an effort to win their support.